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The US fiscal mess: Some unpleasant fiscal simulations

141 points by cen4 2y ago

Proven 2y ago
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avidiax 2y ago
It's an interesting article, but the number of typos makes me wonder how rigorous it is. It also takes as an unstated given that we need or want to stabilize deficit/GDP or debt/GDP ratios. The US dollar is still a global reserve currency. The US situation might therefore be "special" or "privileged" compared to other countries that have non-reserve "local" currencies. The other question I have, is "does debt/GDP & deficit/GDP matter in absolute terms, or only in relative terms?". One could imagine a world where most governments have similar debt problems, and their currencies have similar inflation problems. For someone holding currency, there would be little reason to pick another currency in this scenario. One would instead predict a rush to place money in assets, causing asset inflation. That sounds like our present calamity, perhaps from different or more varied causes.
- neilwilson 2y ago
  Why do you think it matters at all? The choice to pay interest on what is in fact a balancing item in the accounts is a political choice. Just don't do that and then those ratios are irrelevant. We have a floating rate exchange system. Quite why people think ratios from a fixed exchange rate era remain relevant is difficult to understand. Other than that is what they really want to go back to - one world currency with no variation and governments completely unable to direct resources for the benefit of their own people, rather than global capital. The world has excess production. Where is the untapped source of demand that will replace the current net import nations? There isn't any. That's why those with excess production swap that excess production for promises, rather than physical output.
  - Aeolun 2y ago
    The ratio does not matter beyond giving some indication of when you’ll be printing as much money as your entire economy contains every year. It’s not that you need to do anything about it at all, but eventually your economy will completely collapse.
    - imtringued 2y ago
      >It’s not that you need to do anything about it at all, but eventually your economy will completely collapse. The vast majority of money systems were designed to be disposable and to only last a few hundred years though.
      - _heimdall 2y ago
        That's interesting, where do you get that from? I have a hard time seeing people creating a new money system purposely building one that they expect from the beginning to fail.
      - fragmede 2y ago
        no they're not. what ridiculous crypto manifesto did you pull that out from?
    - neilwilson 2y ago
      Why and how will it “collapse”? If you want to use the “printing money” analogy because you can’t grok the correct credit and debit process then you have to accept that taxation “shreds money” and saving money (which is what a deficit is) “puts it in a drawer”. How does people putting money in a drawer cause a problem?
  - imtringued 2y ago
    >That's why those with excess production swap that excess production for promises, rather than physical output. That's the thing. Mercantilism never really went away. It is just more subtle nowadays. The greek crisis can be boiled down to this: "Germany is exporting to Greece, because the absence of exchange rates makes German products unreasonably cheap in comparison to Greek products. Greece therefore buys from Germany, but Germany doesn't buy from Greece."
- verzali 2y ago
  It's written in British English. Other than that, I didn't see any typos?
jameslk 2y ago
There’s no political will to raise taxes and cut government spending. One or the other may happen but not both. Both are required to get us out of this mess. We don’t have politicians that think long term. As a consequence, the Fed will be forced to lower interest rates as low as possible again so the government can escape crushing interest payments and let inflation inflate away government debt. Expect long term inflation, asset prices, and commodity prices that keeps rising as a consequence.
- toomuchtodo 2y ago
  One would think a rating agency might call time on debt growing beyond what a declining population pyramid can support (through ratings downgrades). Even if the Fed lowers rates, investors might not have appetite for declining quality sovereign debt that will never be paid back. But maybe Japan and the BOJ show this is immaterial.
  - DANmode 2y ago
    https://www.cnbc.com/2023/08/08/moodys-cuts-ratings-of-10-us-banks-and-puts-some-big-names-on-downgrade-watch.html https://www.cnbc.com/2023/08/08/moodys-cuts-ratings-of-10-us...
    - toomuchtodo 2y ago
      These are banks, I’m referring to sovereign debt. As a nation state, when you issue sovereign debt, that is a promise to repay that debt in the future. Who will be paying that debt back? Workers generating output that will be taxed in some way, with taxes servicing and retiring future debt obligations. What will there be less of in the future? Workers (structural demographics, total fertility rate rapidly declining globally, etc). The collateral (future worker aggregate productivity) doesn’t exist at the forward curve with the promises to repay in the future, therefore the debt should be rated as higher risk and less likely to be paid back. This would force interest rates higher on issued debt (more risk demands higher yields), but whether the market has an appetite for debt issued with more realistic fundamental expectations remains to be seen.
ilaksh 2y ago
How does this compare to the fiscal situation at the time of WWI or WWII? And how does it compare relative to other factors like other countries' finances?
- panick21_ 2y ago
  Basically the US now is approching WW2 level debt. Just outside of a war. Without all the growth. Without all the other destroyed countries in desprate need of rebuilding. Without the young population. With massive unfunded liabilities in its social programs. With massive amounts of crumbling infrastructure. Basically after WW2, as soon as the war was over debt started dropping. Before the great societ stuff, the US didnt have so many future liabilities. Debt was dropping during Korean War.
- fuzzfactor 2y ago
  How about the end of the Vietnam War era? From the 2024 article: "In our best scenario analysis, stabilising the fiscal outlook will take years to accomplish, but also require significant action already in the short run, operating on both spending and taxation. A consolidation over a long horizon should not be confused with procrastination. Waiting is costly: the size of the required correction is already sizeable. With debt growing at a sustained rate, delaying action can only make the required correction larger. Even more, waiting is risky." I was saying exactly this was true in the 1970's and unfortunately that's when the significant action failed to be taken. It really was needed in the short run right then but for lenders there was too much to be made by completing the shift away from the stable debt/asset ratio << 1 which had built the country, rapidly over to a variable payment/cash-flow ratio instead. This is not a perfect simulation since real assets are important, but the main thing is it allows the lenders to avoid shrinking themselves, or even grow a bit during times of no actual growth in the "economy" at large. And the payment/cash-flow ratio can be focused on and "responsibly" maintained below 1 since that is a widely-agreed "bad thing" which leads to certain collapse for a financier. But acceptance of this allowed the newly deprecated debt/asset ratio to rise exponentially from its near-zero starting point since additional debts (often at less-attractive terms for the payers) could be piled on more discreetly, and assets themselves are virtually out of the equation too and more ripe for the taking if opportunities presented themself. There was so much more money to be made by making deeper debtors out of those who were established, and adding new debtors to the rolls whose underlying assets were too low to be reasonable under normal times. Assets of the most well-heeled can be better protected, and assets of the masses tapped into in different ways and neither will effect the overall equations or outlook when the equations are based on "money supply" and "velocity" rather than (remaining) net wealth or real assets. It's a slippery slope but if assets are being tapped into they dwindle, regardless of how the payment/cash-flow figure may take prominence and provide untold opportunities for those adjacent to the cash pipeline. Debt/asset can then smoothly climb much closer to 1 without gaining enough attention, and even smoothly move above 1 with no further apparent effect ! But let that "hidden" debt/asset ratio remain above 1 long enough, or even above 0.5 beyond "2 whole periods of time" and assets will not stop declining toward zero until done. Automatically, without additional debt being incurred. And the ratio goes through the roof even faster. Unless something major is done about it. Meanwhile the sky remains blue and nothing can be seen on the horizon that looks any more threatening than it has been the last few decades. The action needed now is the cost of waiting this long.
admralprawn 2y ago
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- Varriount 2y ago
  As far as I know, Ukraine doesn't have any leader like that. Could you provide more information? Also, according to https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/ https://fiscaldata.treasury.gov/americas-finance-guide/feder... and https://www.cfr.org/article/how-much-us-aid-going-ukraine https://www.cfr.org/article/how-much-us-aid-going-ukraine , the amount spent on Ukraine as a percentage of total government spending seems to be around 3%, not taking into account the fact that some of that might have been spent anyway (for example, old munitions that would have otherwise been replaced were sent to Ukraine).
  - The_Colonel 2y ago
    It's an account created hours ago immediately spewing Kremlin propaganda... let's not feed it.
    - ta1243 2y ago
      I find it fascinating that the right wing in the US is massively pro Russia. It didn't happen in the UK, probably because of a populist prime minister (Johnson) who wanted to be seen as a Churchill figure throwing immense and unconditional support to Ukraine, it meant that pro-Russia elements couldn't really get any traction.
      - roenxi 2y ago
        There are remarkably few overlaps between the geopolitical situation of the UK vs the US. It isn't unexpected that people take different positions - the only thing the right wing parties are expected to agree on are some broad economic and social principles. With a lot of caveats and "maybe"s. It is like being fascinated that the Indian right have different opinions, or the South African right. Or the Russian right. Or different factions of the US right wing. It is fascinating, but the UK voters aren't expected to be on the same wavelength as the States; Johnson or no Johnson. They have different interests and motivations.
rwmj 2y ago
(Genuine questions here!) Is paying less interest an option? Either "refinancing" the debt at lower interest rates, or simply declaring that existing bonds will be paid out at a lower rate? People will presumably still want to hold US Treasuries because of their other properties. Also Japan has a debt to GDP much, much greater than the US, and still seems to function fine as a country, so how do they do things differently?
- ifwinterco 2y ago
  The federal reserve can just buy the debt from the government using newly created central bank reserves, but this increases the money supply so in the long run it will cause inflation (eventually you end up with Weimar/Zimbabwe style hyperinflation, although that's a long way from where we are now). Japan has essentially been doing this (the mechanics are a bit more complicated, but the effect is essentially the same), and they've been able to get away with it because inflation has been low for the last three decades due to external factors such as globalisation. Now inflation is starting to rise even in Japan, so they may have some issues in the not too distant future.
  - phartenfeller 2y ago
    Money growth and inflation has no direct connection. It can impact it but doesn't have to. In europe the inflation was caused by the supply chain crisis: https://www.ecb.europa.eu/press/key/date/2023/html/ecb.sp230925_1~7ad8ef22e2.en.html https://www.ecb.europa.eu/press/key/date/2023/html/ecb.sp230... Additionally some experts say that the inflation was bigger in Europe because the governments didn't do investments with new debt.
    - georgeplusplus 2y ago
      that’s the governments in the EU deflecting blame and not admitting they messed up telling people to stay home, in some countries up to a year, and then paying those people to stay home (literally money printing) that it had no direct influence on inflation or wasa primary driver of it. I mean you’d have to be completely stupid to believe that what they did had no impact on inflation.
worstspotgain 2y ago
I'm not going to comment on the article because most electively-undertaken fiscal projections are colored with the theories harbored by the authors. However, I'd like to point out that the budget hawks of yesteryear (Reagan, Simpson, McCain) were at least logically consistent in that they were pro-immigration. Immigration's positive impact on US fiscal policy is so large that not even right-wing think-tanks can refute it. [1] It raises the fraction of the population currently in the labor force. As a separate, compounded effect, the average immigrant contributes more to the social services pot than they draw out. The bonus to Social Security is even larger because of the undocumented population, which pays payroll taxes but is ineligible for retirement benefits. This effectively foots the bill for 2-3 million American retirees. [2] So when today's populists peddle nativism while posing as budget hawks, it really fits in nicely with the rest of their bill of goods. [1] https://www.cato.org/blog/fiscal-impact-immigration-united-states https://www.cato.org/blog/fiscal-impact-immigration-united-s... [2] https://www.americanprogress.org/article/improving-lives-strengthening-finances-the-benefits-of-immigration-reform-to-social-security/ https://www.americanprogress.org/article/improving-lives-str...
- koolba 2y ago
  > However, I'd like to point out that the budget hawks of yesteryear (Reagan, Simpson, McCain) were at least logically consistent in that they were pro-immigration. Being pro immigration does not mean you’re pro illegal immigration. > The bonus to Social Security is even larger because of the undocumented population, which pays payroll taxes but is ineligible for retirement benefits. This effectively foots the bill for 2-3 million American retirees. If they don’t have social security numbers, they’re not paying payroll taxes.
  - worstspotgain 2y ago
    > Being pro immigration does not mean you’re pro illegal immigration. This distinction is mostly out the window with today's populists, see e.g. repealing jus soli and all the other racist dogwhistles. > If they don’t have social security numbers, they’re not paying payroll taxes. They're using SSNs, often false or not their own. Read about the Earnings Suspense File at the SSA in the second link I posted.
panick21_ 2y ago
> The US interest bill is rising. In 2024, it is projected to exceed the entire military budget. This is the one that is mind blowing. The military is fucking gigantically huge. And every single years a militray budget worth of stuff simple gets burned for 'nothing'. The problem in the US is that most of the money is already commited. The future money is already promissed. And the rest is mostly military and debt service. And what is left over isnt enough to cut to be effective. I really dont see a solution. I'm happy that in my country we have strict limits in place and debt/gpd is only 40%. Not have the huge debt servicing ever year seems usuful to stabilze your budget long term.
GreatLdisisp88 2y ago
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- _heimdall 2y ago
  I very much agree with your distaste for simulations and modelling. How, though, are you coming up with predictions for such specific future failures in everything from fracking to Netflix to gold without modelling?
  - JKCalhoun 2y ago
    Presumably from historic trends. I see what you're getting at and somewhat agree but I don't always discount a little armchair quarterbacking as well.
    - _heimdall 2y ago
      I didn't actually mean to discount it, I think I just phrased my comment poorly and it sounded like more of a logical trap than I meant it to be. I really am curious how someone gets to such specific claims without modelling and simulations.
- ta1243 2y ago
  > Heck even Chinese is now sending more rockets and successfully than Elon+NASA The US has launched 84 of the 134 orbital flights this year, 2.5 times as many as China's 32.
- cageface 2y ago
  The US has abundant land and natural resources, a single language and fairly uniform culture, no real threats on its borders and, and least so far, a reliably peaceful means of getting rid of bad leaders. It may not be as dominant going forward as it was in the second half of the 20th century but the idea that it’s going to be relegated to some kind of banana republic status is laughable given the problems of the competition.
  - 2y ago
DataDive 2y ago
As the joke goes. If I owe you 100 grand and I can't pay, I am in trouble. If I owe you 100 trillion and I can't pay, you are in trouble.
roenxi 2y ago
The sign in the article is out of date, it claims the US debt is ~$31 trillion. That is off by about $4 trillion; which I think dates the photo to sometime last year or the year before.
ta1243 2y ago
Who is this debt owed to and what will they do with it should it be repaid?
- jmclnx 2y ago
  Most is owed to Social Security. The money paid into that is invested in US Bonds. That is based upon an article I say a while ago. As for taxes, the past few GOP admins lowed taxes for the ultra wealthy and corporations. If they had stayed at the same level, the debt would be much lower. Plus Bush's invasion of Iraq, for no reason, added quite a bit also.
  - tryptophan 2y ago
    Nope social security money is not invested, it's just put into general revenue and spent.
tim333 2y ago
The article is a bit doom and gloom. The debt to GDP levels are fairly middling against other developing countries. Also historically what usually happens to government debt is that it isn't really paid back but sits there and is reduced in value over time by inflation. That will probably happen here.
- MuffinFlavored 2y ago
  > by inflation By average 2-3% a year inflation or by above-average heightened inflation (which hurts people)? https://www.google.com/search?q=inflation+tax https://www.google.com/search?q=inflation+tax
  - enceladus06 2y ago
    Based on the amount of debt, inflation may exceed 2-3%, and there will be complaints. To fix the debt load, a combination of inflation, taxes, and spending cuts will be needed. Additionally, the intergenerational transfer of wealth from Boomers to Millennials and Zoomers will occur over the next 20ish years as Boomers die off. This wealth transfer could be used to increase tax revenues. One tax that could be raised would be the estate tax, which would be unpopular among the wealthy, but if lowered to 1MM-1.5MM (maybe 10% rate) and over 50MM (50% rate) would help to fill the deficit. The more likely scnario is the government allows higher inflation rates and we have a bag of cheetos costing $10 in <10 years.
  - tim333 2y ago
    Who knows but back 30 years the US consumer price index is up 2.13x. My guess is that in another 30 years the debt will be there but reduced in value by something like that. And the CPI tends to understate inflation a bit.
- alephnerd 2y ago
  > The article is a bit doom and gloom The CEPR is an EU think tank supported by the French Government [0] France and Germany have been lobbying against US stimulus packages like the IRA and IIJA, and economic protectionism that has become mainstream politically [1]. It is becoming a trade war [2] Western European allies can tell the US what to do when they start carrying their weight like Poland, Romania, Czechia, etc. [0] - https://cepr.org/about https://cepr.org/about [1] - https://www.politico.eu/article/macron-heads-to-washington-on-mission-to-avert-transatlantic-trade-war/ https://www.politico.eu/article/macron-heads-to-washington-o... [2] - https://www.institutmontaigne.org/en/expressions/real-reasons-why-europe-concerned-us-inflation-reduction-act https://www.institutmontaigne.org/en/expressions/real-reason...
alephnerd 2y ago
The CEPR is an EU think tank supported by the French Government [0] France and Germany have been lobbying against US stimulus packages like the IRA and IIJA, and economic protectionism that has become mainstream politically [1]. It is becoming a trade war [2] Western European allies can tell the US what to do when they start carrying their weight like Poland, Romania, Czechia, etc. [0] - https://cepr.org/about https://cepr.org/about [1] - https://www.politico.eu/article/macron-heads-to-washington-on-mission-to-avert-transatlantic-trade-war/ https://www.politico.eu/article/macron-heads-to-washington-o... [2] - https://www.institutmontaigne.org/en/expressions/real-reasons-why-europe-concerned-us-inflation-reduction-act https://www.institutmontaigne.org/en/expressions/real-reason...
- mamonster 2y ago
  All of the countries you named as "carrying their own weight" have the curious commonality of being net recipients of massive amounts of money from the EU cohesion budgets (i.e Western Europe) over the last 10 years. Very easy to spend money on big guns and other projects when you are Poland and get something like 10 billion euro net on average for the last decade. EU scary hours will begin in something like 10-15 years when Poland will be asked to become a net contributor (after they converge and some W. Europe country will inevitable come up with the idea of plugging fiscal deficits by cutting EU contributions).
  - alephnerd 2y ago
    EU's problems are the EU's to solve. Doesn't mean Americans should undermine our Industrial Policy because French and German players are nowhere near as competitive. At least Eastern European allies help cover and support American defense spending in Europe, while Western European players like France and Germany are opposed to Atlanticism unless SHTF
hartator 2y ago
I think this is missing out the most-obvious corrective scenario: super-high inflation.
treebeard901 2y ago
Important to consider that all the debt was created during a time of relative peace. Now, the U.S. is potentially facing three simultaneous wars having already increased the debt to these levels. There are changes in international settlement that bypass the dollar. China and Russia and others have been advancing ways around needing to use the U.S. which is already having consequences as some of this would have found its way to funding the rising U.S. deficit. Most likely through buying Government debt and there is a chance we will know when the debt party is over if there is ever a Treasury issuance that cant find a buyer. Given that part of the problem is the system where there is always a buyer of last resort and so much of the debt is money we owe ourselves. Which reduces but does not eliminate the impact of the move away from the dollar. It is clearly unsustainable and certain measures like the reverse repo market show a sort of short term liquidity and it is interesting to compare it to future issuance of debt. The resulting effect then would have to be increased inflation until spending reaches and equilibrium again. Though with all of the potential threats around the world, anything can happen. It just isn't sustainable and there seems to be a collective delusion that it is.
- lumost 2y ago
  One could take a cynical view that the collective delusion is necessary to sustain increasing wealth inequality. Americans are highly unlikely to accept such inequality if it is accompanied by large reductions in the standard of living. On paper, the debt isn’t a big deal if the government could close out the balance with private assets.
- crote 2y ago
  It isn't just wars. Infrastructure is crumbling because it's well past replacement age, climate change avoidance and mitigation is going to require massive investments over the next few decades, and the aging population is going to result in a big spending increase while tax income from the working is going to shrink. Even if the US manages to not get involved in yet another expensive overseas war, it's still going to have significant budget issues. Decades of prosperity have been squandered with zero long-term vision, let's hope the backlash from it in the near future won't be too bad.
admralprawn 2y ago
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Nifty3929 2y ago
People forget that the economy is not about money, it's about stuff - the goods and services that add (economic) value to our lives: food, shelter, video games, medical treatments, shoes, etc. The problem isn't the deficit - it's the spending. When the government spends money, it takes people away from whatever other economic activity that person would be doing, and consumes their labor in service of the government instead. This reduces economic productivity, and we all end up with less stuff as a result. The key is to focus on productivity in terms of stuff (not money) - everything else takes care of itself. This is important because focusing on money and the deficit often inspire solutions that attempt to solve those problems, but at the cost of hurting productivity. Higher taxes, for example. Raising taxes may (arguably) raise revenue and reduce the deficit - but may well also reduce productivity. That would be bad.
- c22 2y ago
  Why is government spending a black hole of productivity? Does it not result in "stuff"?
  - oceanplexian 2y ago
    Yes, because the government does things like staff a building with 100 government employees that could have been replaced by a simple website if it was done by a private company.
    - Nifty3929 2y ago
      Or, more the point, staffed by 100 employees that could have otherwise been producing houses, shoes, food, medicine, movies etc. But they aren't doing those things because they are busy working for the government.
      - gamblor956 2y ago
        There is no chance that the 100 employese making the website would have been making houses, shoes, food, medicine, etc., because they wouldn't have the skills to do any of that. The alternative to working for government making a useful website that would be productively used by millions of their fellow citizens is working for yet another "startup" making Yet Another Pointless Social Media or AI scam with no revenue model beyond getting acquired by a bigger company.
chung8123 2y ago
It is weird to me to have so many people complain about inflation and have so many people say that our deficits won't cause inflation. We have been hiding inflation for so long and it finally hit us. Unfortunately I haven't met a politician yet that will actually try to balance the budget. It is a bunch of spend more and cut taxes that win elections.
- listless 2y ago
  Austerity is miserable. It does not win elections. Even if a party bit the bullet, locked in and fixed this mess, they would be handing both the credit for any success and at least the best few future elections to the other party. Our system seems designed to fail from some angles.
  - chung8123 2y ago
    It is a similar thing with climate change to be honest. We have been spending at a pace we cannot keep up with. In my mind, of course we won't have the same luxuries as our parents, they bought that life with CO2 debt.
- Der_Einzige 2y ago
  Bernie and other hardcore progressives will balance it, but the tax increases that would come from that will have everyone accusing them on being pinkos.
deleted 2y ago
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xyzzy4747 2y ago
The debt doesn't matter too much... what matters the most for any country is if they have a lot of educated and talented people living there or not, the companies they work for, and a stable society and political environment. This is not going to change due to federal accounting tricks. It would be better to live in the U.S. with a 100x debt/gdp than live in Haiti, Niger, or South Sudan with a 0.1x debt/gdp.
- panick21_ 2y ago
  Better then a 3rd world country in a civial war isnt the goal most people aspire too. Servicing the exisiting debt already cost the US a whole militaries worth of budget. And that is after decades of low interest rates. If interest rates go up even slightly, you have to refinance all the debt with a higher rate. And if the private market ever decide to lower the rating on US debt, or starts to expect higher inflation. The debt servicing alone could consume pretty much the whole discretionary budget. And remember the are massive budget issue on town and state level in the US too. And they expect the federal government to fund all the massive infrastructure spending they need. Plus all the federal infrastructure.All that infrastructure from the 60-70 is falling apart. The backlog is already huge and getting bigger, that from the discretionary budget. So debt absolutly matters, it has mattered to every government for at least 5000 years. A societ that is stable can be made unstable, and debt is usually involved. France just had massive demostrations because they wanted to increase retierment age. And that was a drop in the bucket compared to what France needs. That has lead to massive victory for outright nazi party in France, and the far left who want to ignore this problem has also won. And this is in normal peacful times. What if another finacial crisis happen? Lets see how stable everything is once taxes double or social services get cut massively. That how you get people elected with programs that are the opposite of a stable political envoirment.
  - xyzzy4747 2y ago
    Yes the debt matters, but compared to other factors in a nation with its own currency, it's quite insignificant. My point is other people are acting like its doomsday if the debt goes too high but I don't think it's that big of a deal in the grand scheme of things.
magicfractal 2y ago
As long as US imperialism exists, the US dollar will be reserve currency and the US will be able to print away problems. This is the exorbitant privilege the US has which is effectively extracting tribute from all international transactions in dollar.
- arresin 2y ago
  But would the US go after a country that wanted to trade in another currency? I don’t see that happening tbh.
  - ta1243 2y ago
    Some completely unrelated information, Iraq moved to using the Euro to sell oil in November 2000 https://www.rferl.org/a/1095057.html https://www.rferl.org/a/1095057.html
  - ngetchell 2y ago
    Saddam moved Iraq over to the Euro and we invaded shortly after. Maybe a coincidence. Maybe a piece of straw that went on to break the camels back.
- mannyv 2y ago
  The dollar is the reserve currency because there are no viable alternatives. It’s not about imperialism or hegemony, which are fashionable reasons used by the poor. It’s literally because there are no alternatives. The US also is in the unique position of stabilizing the entire world financial system, something it does on an occasional basis. I’m not sure you understand what the price of financial chaos is, but it generally involves massive amounts of human suffering. As an aside, imperialism is generally better than anarchy. Ask Libyans and Somalians how anarchy is working out for them.

141 points by cen4 2y ago

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It's an interesting article, but the number of typos makes me wonder how rigorous it is. It also takes as an unstated given that we need or want to stabilize deficit/GDP or debt/GDP ratios. The US dollar is still a global reserve currency. The US situation might therefore be "special" or "privileged" compared to other countries that have non-reserve "local" currencies. The other question I have, is "does debt/GDP & deficit/GDP matter in absolute terms, or only in relative terms?". One could imagine a world where most governments have similar debt problems, and their currencies have similar inflation problems. For someone holding currency, there would be little reason to pick another currency in this scenario. One would instead predict a rush to place money in assets, causing asset inflation. That sounds like our present calamity, perhaps from different or more varied causes.

neilwilson 2y ago
Why do you think it matters at all? The choice to pay interest on what is in fact a balancing item in the accounts is a political choice. Just don't do that and then those ratios are irrelevant. We have a floating rate exchange system. Quite why people think ratios from a fixed exchange rate era remain relevant is difficult to understand. Other than that is what they really want to go back to - one world currency with no variation and governments completely unable to direct resources for the benefit of their own people, rather than global capital. The world has excess production. Where is the untapped source of demand that will replace the current net import nations? There isn't any. That's why those with excess production swap that excess production for promises, rather than physical output.
- Aeolun 2y ago
  The ratio does not matter beyond giving some indication of when you’ll be printing as much money as your entire economy contains every year. It’s not that you need to do anything about it at all, but eventually your economy will completely collapse.
  - imtringued 2y ago
    >It’s not that you need to do anything about it at all, but eventually your economy will completely collapse. The vast majority of money systems were designed to be disposable and to only last a few hundred years though.
    - _heimdall 2y ago
      That's interesting, where do you get that from? I have a hard time seeing people creating a new money system purposely building one that they expect from the beginning to fail.
    - fragmede 2y ago
      no they're not. what ridiculous crypto manifesto did you pull that out from?
  - neilwilson 2y ago
    Why and how will it “collapse”? If you want to use the “printing money” analogy because you can’t grok the correct credit and debit process then you have to accept that taxation “shreds money” and saving money (which is what a deficit is) “puts it in a drawer”. How does people putting money in a drawer cause a problem?
- imtringued 2y ago
  >That's why those with excess production swap that excess production for promises, rather than physical output. That's the thing. Mercantilism never really went away. It is just more subtle nowadays. The greek crisis can be boiled down to this: "Germany is exporting to Greece, because the absence of exchange rates makes German products unreasonably cheap in comparison to Greek products. Greece therefore buys from Germany, but Germany doesn't buy from Greece."
verzali 2y ago
It's written in British English. Other than that, I didn't see any typos?

jameslk 2y ago

There’s no political will to raise taxes and cut government spending. One or the other may happen but not both. Both are required to get us out of this mess. We don’t have politicians that think long term. As a consequence, the Fed will be forced to lower interest rates as low as possible again so the government can escape crushing interest payments and let inflation inflate away government debt. Expect long term inflation, asset prices, and commodity prices that keeps rising as a consequence.

toomuchtodo 2y ago
One would think a rating agency might call time on debt growing beyond what a declining population pyramid can support (through ratings downgrades). Even if the Fed lowers rates, investors might not have appetite for declining quality sovereign debt that will never be paid back. But maybe Japan and the BOJ show this is immaterial.
- DANmode 2y ago
  https://www.cnbc.com/2023/08/08/moodys-cuts-ratings-of-10-us-banks-and-puts-some-big-names-on-downgrade-watch.html https://www.cnbc.com/2023/08/08/moodys-cuts-ratings-of-10-us...
  - toomuchtodo 2y ago
    These are banks, I’m referring to sovereign debt. As a nation state, when you issue sovereign debt, that is a promise to repay that debt in the future. Who will be paying that debt back? Workers generating output that will be taxed in some way, with taxes servicing and retiring future debt obligations. What will there be less of in the future? Workers (structural demographics, total fertility rate rapidly declining globally, etc). The collateral (future worker aggregate productivity) doesn’t exist at the forward curve with the promises to repay in the future, therefore the debt should be rated as higher risk and less likely to be paid back. This would force interest rates higher on issued debt (more risk demands higher yields), but whether the market has an appetite for debt issued with more realistic fundamental expectations remains to be seen.

ilaksh 2y ago

How does this compare to the fiscal situation at the time of WWI or WWII? And how does it compare relative to other factors like other countries' finances?

panick21_ 2y ago
Basically the US now is approching WW2 level debt. Just outside of a war. Without all the growth. Without all the other destroyed countries in desprate need of rebuilding. Without the young population. With massive unfunded liabilities in its social programs. With massive amounts of crumbling infrastructure. Basically after WW2, as soon as the war was over debt started dropping. Before the great societ stuff, the US didnt have so many future liabilities. Debt was dropping during Korean War.
fuzzfactor 2y ago
How about the end of the Vietnam War era? From the 2024 article: "In our best scenario analysis, stabilising the fiscal outlook will take years to accomplish, but also require significant action already in the short run, operating on both spending and taxation. A consolidation over a long horizon should not be confused with procrastination. Waiting is costly: the size of the required correction is already sizeable. With debt growing at a sustained rate, delaying action can only make the required correction larger. Even more, waiting is risky." I was saying exactly this was true in the 1970's and unfortunately that's when the significant action failed to be taken. It really was needed in the short run right then but for lenders there was too much to be made by completing the shift away from the stable debt/asset ratio << 1 which had built the country, rapidly over to a variable payment/cash-flow ratio instead. This is not a perfect simulation since real assets are important, but the main thing is it allows the lenders to avoid shrinking themselves, or even grow a bit during times of no actual growth in the "economy" at large. And the payment/cash-flow ratio can be focused on and "responsibly" maintained below 1 since that is a widely-agreed "bad thing" which leads to certain collapse for a financier. But acceptance of this allowed the newly deprecated debt/asset ratio to rise exponentially from its near-zero starting point since additional debts (often at less-attractive terms for the payers) could be piled on more discreetly, and assets themselves are virtually out of the equation too and more ripe for the taking if opportunities presented themself. There was so much more money to be made by making deeper debtors out of those who were established, and adding new debtors to the rolls whose underlying assets were too low to be reasonable under normal times. Assets of the most well-heeled can be better protected, and assets of the masses tapped into in different ways and neither will effect the overall equations or outlook when the equations are based on "money supply" and "velocity" rather than (remaining) net wealth or real assets. It's a slippery slope but if assets are being tapped into they dwindle, regardless of how the payment/cash-flow figure may take prominence and provide untold opportunities for those adjacent to the cash pipeline. Debt/asset can then smoothly climb much closer to 1 without gaining enough attention, and even smoothly move above 1 with no further apparent effect ! But let that "hidden" debt/asset ratio remain above 1 long enough, or even above 0.5 beyond "2 whole periods of time" and assets will not stop declining toward zero until done. Automatically, without additional debt being incurred. And the ratio goes through the roof even faster. Unless something major is done about it. Meanwhile the sky remains blue and nothing can be seen on the horizon that looks any more threatening than it has been the last few decades. The action needed now is the cost of waiting this long.

admralprawn 2y ago

[flagged]

Varriount 2y ago
As far as I know, Ukraine doesn't have any leader like that. Could you provide more information? Also, according to https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/ https://fiscaldata.treasury.gov/americas-finance-guide/feder... and https://www.cfr.org/article/how-much-us-aid-going-ukraine https://www.cfr.org/article/how-much-us-aid-going-ukraine , the amount spent on Ukraine as a percentage of total government spending seems to be around 3%, not taking into account the fact that some of that might have been spent anyway (for example, old munitions that would have otherwise been replaced were sent to Ukraine).
- The_Colonel 2y ago
  It's an account created hours ago immediately spewing Kremlin propaganda... let's not feed it.
  - ta1243 2y ago
    I find it fascinating that the right wing in the US is massively pro Russia. It didn't happen in the UK, probably because of a populist prime minister (Johnson) who wanted to be seen as a Churchill figure throwing immense and unconditional support to Ukraine, it meant that pro-Russia elements couldn't really get any traction.
    - roenxi 2y ago
      There are remarkably few overlaps between the geopolitical situation of the UK vs the US. It isn't unexpected that people take different positions - the only thing the right wing parties are expected to agree on are some broad economic and social principles. With a lot of caveats and "maybe"s. It is like being fascinated that the Indian right have different opinions, or the South African right. Or the Russian right. Or different factions of the US right wing. It is fascinating, but the UK voters aren't expected to be on the same wavelength as the States; Johnson or no Johnson. They have different interests and motivations.

rwmj 2y ago

(Genuine questions here!) Is paying less interest an option? Either "refinancing" the debt at lower interest rates, or simply declaring that existing bonds will be paid out at a lower rate? People will presumably still want to hold US Treasuries because of their other properties. Also Japan has a debt to GDP much, much greater than the US, and still seems to function fine as a country, so how do they do things differently?

ifwinterco 2y ago
The federal reserve can just buy the debt from the government using newly created central bank reserves, but this increases the money supply so in the long run it will cause inflation (eventually you end up with Weimar/Zimbabwe style hyperinflation, although that's a long way from where we are now). Japan has essentially been doing this (the mechanics are a bit more complicated, but the effect is essentially the same), and they've been able to get away with it because inflation has been low for the last three decades due to external factors such as globalisation. Now inflation is starting to rise even in Japan, so they may have some issues in the not too distant future.
- phartenfeller 2y ago
  Money growth and inflation has no direct connection. It can impact it but doesn't have to. In europe the inflation was caused by the supply chain crisis: https://www.ecb.europa.eu/press/key/date/2023/html/ecb.sp230925_1~7ad8ef22e2.en.html https://www.ecb.europa.eu/press/key/date/2023/html/ecb.sp230... Additionally some experts say that the inflation was bigger in Europe because the governments didn't do investments with new debt.
  - georgeplusplus 2y ago
    that’s the governments in the EU deflecting blame and not admitting they messed up telling people to stay home, in some countries up to a year, and then paying those people to stay home (literally money printing) that it had no direct influence on inflation or wasa primary driver of it. I mean you’d have to be completely stupid to believe that what they did had no impact on inflation.

worstspotgain 2y ago

I'm not going to comment on the article because most electively-undertaken fiscal projections are colored with the theories harbored by the authors. However, I'd like to point out that the budget hawks of yesteryear (Reagan, Simpson, McCain) were at least logically consistent in that they were pro-immigration. Immigration's positive impact on US fiscal policy is so large that not even right-wing think-tanks can refute it. [1] It raises the fraction of the population currently in the labor force. As a separate, compounded effect, the average immigrant contributes more to the social services pot than they draw out. The bonus to Social Security is even larger because of the undocumented population, which pays payroll taxes but is ineligible for retirement benefits. This effectively foots the bill for 2-3 million American retirees. [2] So when today's populists peddle nativism while posing as budget hawks, it really fits in nicely with the rest of their bill of goods. [1] https://www.cato.org/blog/fiscal-impact-immigration-united-states https://www.cato.org/blog/fiscal-impact-immigration-united-s... [2] https://www.americanprogress.org/article/improving-lives-strengthening-finances-the-benefits-of-immigration-reform-to-social-security/ https://www.americanprogress.org/article/improving-lives-str...

koolba 2y ago
> However, I'd like to point out that the budget hawks of yesteryear (Reagan, Simpson, McCain) were at least logically consistent in that they were pro-immigration. Being pro immigration does not mean you’re pro illegal immigration. > The bonus to Social Security is even larger because of the undocumented population, which pays payroll taxes but is ineligible for retirement benefits. This effectively foots the bill for 2-3 million American retirees. If they don’t have social security numbers, they’re not paying payroll taxes.
- worstspotgain 2y ago
  > Being pro immigration does not mean you’re pro illegal immigration. This distinction is mostly out the window with today's populists, see e.g. repealing jus soli and all the other racist dogwhistles. > If they don’t have social security numbers, they’re not paying payroll taxes. They're using SSNs, often false or not their own. Read about the Earnings Suspense File at the SSA in the second link I posted.

panick21_ 2y ago

> The US interest bill is rising. In 2024, it is projected to exceed the entire military budget. This is the one that is mind blowing. The military is fucking gigantically huge. And every single years a militray budget worth of stuff simple gets burned for 'nothing'. The problem in the US is that most of the money is already commited. The future money is already promissed. And the rest is mostly military and debt service. And what is left over isnt enough to cut to be effective. I really dont see a solution. I'm happy that in my country we have strict limits in place and debt/gpd is only 40%. Not have the huge debt servicing ever year seems usuful to stabilze your budget long term.

GreatLdisisp88 2y ago

[flagged]

_heimdall 2y ago
I very much agree with your distaste for simulations and modelling. How, though, are you coming up with predictions for such specific future failures in everything from fracking to Netflix to gold without modelling?
- JKCalhoun 2y ago
  Presumably from historic trends. I see what you're getting at and somewhat agree but I don't always discount a little armchair quarterbacking as well.
  - _heimdall 2y ago
    I didn't actually mean to discount it, I think I just phrased my comment poorly and it sounded like more of a logical trap than I meant it to be. I really am curious how someone gets to such specific claims without modelling and simulations.
ta1243 2y ago
> Heck even Chinese is now sending more rockets and successfully than Elon+NASA The US has launched 84 of the 134 orbital flights this year, 2.5 times as many as China's 32.
cageface 2y ago
The US has abundant land and natural resources, a single language and fairly uniform culture, no real threats on its borders and, and least so far, a reliably peaceful means of getting rid of bad leaders. It may not be as dominant going forward as it was in the second half of the 20th century but the idea that it’s going to be relegated to some kind of banana republic status is laughable given the problems of the competition.
- 2y ago

DataDive 2y ago

As the joke goes. If I owe you 100 grand and I can't pay, I am in trouble. If I owe you 100 trillion and I can't pay, you are in trouble.

roenxi 2y ago

The sign in the article is out of date, it claims the US debt is ~$31 trillion. That is off by about $4 trillion; which I think dates the photo to sometime last year or the year before.

ta1243 2y ago

Who is this debt owed to and what will they do with it should it be repaid?

jmclnx 2y ago
Most is owed to Social Security. The money paid into that is invested in US Bonds. That is based upon an article I say a while ago. As for taxes, the past few GOP admins lowed taxes for the ultra wealthy and corporations. If they had stayed at the same level, the debt would be much lower. Plus Bush's invasion of Iraq, for no reason, added quite a bit also.
- tryptophan 2y ago
  Nope social security money is not invested, it's just put into general revenue and spent.

tim333 2y ago

The article is a bit doom and gloom. The debt to GDP levels are fairly middling against other developing countries. Also historically what usually happens to government debt is that it isn't really paid back but sits there and is reduced in value over time by inflation. That will probably happen here.

MuffinFlavored 2y ago
> by inflation By average 2-3% a year inflation or by above-average heightened inflation (which hurts people)? https://www.google.com/search?q=inflation+tax https://www.google.com/search?q=inflation+tax
- enceladus06 2y ago
  Based on the amount of debt, inflation may exceed 2-3%, and there will be complaints. To fix the debt load, a combination of inflation, taxes, and spending cuts will be needed. Additionally, the intergenerational transfer of wealth from Boomers to Millennials and Zoomers will occur over the next 20ish years as Boomers die off. This wealth transfer could be used to increase tax revenues. One tax that could be raised would be the estate tax, which would be unpopular among the wealthy, but if lowered to 1MM-1.5MM (maybe 10% rate) and over 50MM (50% rate) would help to fill the deficit. The more likely scnario is the government allows higher inflation rates and we have a bag of cheetos costing $10 in <10 years.
- tim333 2y ago
  Who knows but back 30 years the US consumer price index is up 2.13x. My guess is that in another 30 years the debt will be there but reduced in value by something like that. And the CPI tends to understate inflation a bit.
alephnerd 2y ago
> The article is a bit doom and gloom The CEPR is an EU think tank supported by the French Government [0] France and Germany have been lobbying against US stimulus packages like the IRA and IIJA, and economic protectionism that has become mainstream politically [1]. It is becoming a trade war [2] Western European allies can tell the US what to do when they start carrying their weight like Poland, Romania, Czechia, etc. [0] - https://cepr.org/about https://cepr.org/about [1] - https://www.politico.eu/article/macron-heads-to-washington-on-mission-to-avert-transatlantic-trade-war/ https://www.politico.eu/article/macron-heads-to-washington-o... [2] - https://www.institutmontaigne.org/en/expressions/real-reasons-why-europe-concerned-us-inflation-reduction-act https://www.institutmontaigne.org/en/expressions/real-reason...

alephnerd 2y ago

The CEPR is an EU think tank supported by the French Government [0] France and Germany have been lobbying against US stimulus packages like the IRA and IIJA, and economic protectionism that has become mainstream politically [1]. It is becoming a trade war [2] Western European allies can tell the US what to do when they start carrying their weight like Poland, Romania, Czechia, etc. [0] - https://cepr.org/about https://cepr.org/about [1] - https://www.politico.eu/article/macron-heads-to-washington-on-mission-to-avert-transatlantic-trade-war/ https://www.politico.eu/article/macron-heads-to-washington-o... [2] - https://www.institutmontaigne.org/en/expressions/real-reasons-why-europe-concerned-us-inflation-reduction-act https://www.institutmontaigne.org/en/expressions/real-reason...

mamonster 2y ago
All of the countries you named as "carrying their own weight" have the curious commonality of being net recipients of massive amounts of money from the EU cohesion budgets (i.e Western Europe) over the last 10 years. Very easy to spend money on big guns and other projects when you are Poland and get something like 10 billion euro net on average for the last decade. EU scary hours will begin in something like 10-15 years when Poland will be asked to become a net contributor (after they converge and some W. Europe country will inevitable come up with the idea of plugging fiscal deficits by cutting EU contributions).
- alephnerd 2y ago
  EU's problems are the EU's to solve. Doesn't mean Americans should undermine our Industrial Policy because French and German players are nowhere near as competitive. At least Eastern European allies help cover and support American defense spending in Europe, while Western European players like France and Germany are opposed to Atlanticism unless SHTF

hartator 2y ago

I think this is missing out the most-obvious corrective scenario: super-high inflation.

treebeard901 2y ago

Important to consider that all the debt was created during a time of relative peace. Now, the U.S. is potentially facing three simultaneous wars having already increased the debt to these levels. There are changes in international settlement that bypass the dollar. China and Russia and others have been advancing ways around needing to use the U.S. which is already having consequences as some of this would have found its way to funding the rising U.S. deficit. Most likely through buying Government debt and there is a chance we will know when the debt party is over if there is ever a Treasury issuance that cant find a buyer. Given that part of the problem is the system where there is always a buyer of last resort and so much of the debt is money we owe ourselves. Which reduces but does not eliminate the impact of the move away from the dollar. It is clearly unsustainable and certain measures like the reverse repo market show a sort of short term liquidity and it is interesting to compare it to future issuance of debt. The resulting effect then would have to be increased inflation until spending reaches and equilibrium again. Though with all of the potential threats around the world, anything can happen. It just isn't sustainable and there seems to be a collective delusion that it is.

lumost 2y ago
One could take a cynical view that the collective delusion is necessary to sustain increasing wealth inequality. Americans are highly unlikely to accept such inequality if it is accompanied by large reductions in the standard of living. On paper, the debt isn’t a big deal if the government could close out the balance with private assets.
crote 2y ago
It isn't just wars. Infrastructure is crumbling because it's well past replacement age, climate change avoidance and mitigation is going to require massive investments over the next few decades, and the aging population is going to result in a big spending increase while tax income from the working is going to shrink. Even if the US manages to not get involved in yet another expensive overseas war, it's still going to have significant budget issues. Decades of prosperity have been squandered with zero long-term vision, let's hope the backlash from it in the near future won't be too bad.

admralprawn 2y ago

[flagged]

Nifty3929 2y ago

People forget that the economy is not about money, it's about stuff - the goods and services that add (economic) value to our lives: food, shelter, video games, medical treatments, shoes, etc. The problem isn't the deficit - it's the spending. When the government spends money, it takes people away from whatever other economic activity that person would be doing, and consumes their labor in service of the government instead. This reduces economic productivity, and we all end up with less stuff as a result. The key is to focus on productivity in terms of stuff (not money) - everything else takes care of itself. This is important because focusing on money and the deficit often inspire solutions that attempt to solve those problems, but at the cost of hurting productivity. Higher taxes, for example. Raising taxes may (arguably) raise revenue and reduce the deficit - but may well also reduce productivity. That would be bad.

c22 2y ago
Why is government spending a black hole of productivity? Does it not result in "stuff"?
- oceanplexian 2y ago
  Yes, because the government does things like staff a building with 100 government employees that could have been replaced by a simple website if it was done by a private company.
  - Nifty3929 2y ago
    Or, more the point, staffed by 100 employees that could have otherwise been producing houses, shoes, food, medicine, movies etc. But they aren't doing those things because they are busy working for the government.
    - gamblor956 2y ago
      There is no chance that the 100 employese making the website would have been making houses, shoes, food, medicine, etc., because they wouldn't have the skills to do any of that. The alternative to working for government making a useful website that would be productively used by millions of their fellow citizens is working for yet another "startup" making Yet Another Pointless Social Media or AI scam with no revenue model beyond getting acquired by a bigger company.

chung8123 2y ago

It is weird to me to have so many people complain about inflation and have so many people say that our deficits won't cause inflation. We have been hiding inflation for so long and it finally hit us. Unfortunately I haven't met a politician yet that will actually try to balance the budget. It is a bunch of spend more and cut taxes that win elections.

listless 2y ago
Austerity is miserable. It does not win elections. Even if a party bit the bullet, locked in and fixed this mess, they would be handing both the credit for any success and at least the best few future elections to the other party. Our system seems designed to fail from some angles.
- chung8123 2y ago
  It is a similar thing with climate change to be honest. We have been spending at a pace we cannot keep up with. In my mind, of course we won't have the same luxuries as our parents, they bought that life with CO2 debt.
Der_Einzige 2y ago
Bernie and other hardcore progressives will balance it, but the tax increases that would come from that will have everyone accusing them on being pinkos.

deleted 2y ago

[deleted]

xyzzy4747 2y ago

The debt doesn't matter too much... what matters the most for any country is if they have a lot of educated and talented people living there or not, the companies they work for, and a stable society and political environment. This is not going to change due to federal accounting tricks. It would be better to live in the U.S. with a 100x debt/gdp than live in Haiti, Niger, or South Sudan with a 0.1x debt/gdp.

panick21_ 2y ago
Better then a 3rd world country in a civial war isnt the goal most people aspire too. Servicing the exisiting debt already cost the US a whole militaries worth of budget. And that is after decades of low interest rates. If interest rates go up even slightly, you have to refinance all the debt with a higher rate. And if the private market ever decide to lower the rating on US debt, or starts to expect higher inflation. The debt servicing alone could consume pretty much the whole discretionary budget. And remember the are massive budget issue on town and state level in the US too. And they expect the federal government to fund all the massive infrastructure spending they need. Plus all the federal infrastructure.All that infrastructure from the 60-70 is falling apart. The backlog is already huge and getting bigger, that from the discretionary budget. So debt absolutly matters, it has mattered to every government for at least 5000 years. A societ that is stable can be made unstable, and debt is usually involved. France just had massive demostrations because they wanted to increase retierment age. And that was a drop in the bucket compared to what France needs. That has lead to massive victory for outright nazi party in France, and the far left who want to ignore this problem has also won. And this is in normal peacful times. What if another finacial crisis happen? Lets see how stable everything is once taxes double or social services get cut massively. That how you get people elected with programs that are the opposite of a stable political envoirment.
- xyzzy4747 2y ago
  Yes the debt matters, but compared to other factors in a nation with its own currency, it's quite insignificant. My point is other people are acting like its doomsday if the debt goes too high but I don't think it's that big of a deal in the grand scheme of things.

magicfractal 2y ago

As long as US imperialism exists, the US dollar will be reserve currency and the US will be able to print away problems. This is the exorbitant privilege the US has which is effectively extracting tribute from all international transactions in dollar.

arresin 2y ago
But would the US go after a country that wanted to trade in another currency? I don’t see that happening tbh.
- ta1243 2y ago
  Some completely unrelated information, Iraq moved to using the Euro to sell oil in November 2000 https://www.rferl.org/a/1095057.html https://www.rferl.org/a/1095057.html
- ngetchell 2y ago
  Saddam moved Iraq over to the Euro and we invaded shortly after. Maybe a coincidence. Maybe a piece of straw that went on to break the camels back.
mannyv 2y ago
The dollar is the reserve currency because there are no viable alternatives. It’s not about imperialism or hegemony, which are fashionable reasons used by the poor. It’s literally because there are no alternatives. The US also is in the unique position of stabilizing the entire world financial system, something it does on an occasional basis. I’m not sure you understand what the price of financial chaos is, but it generally involves massive amounts of human suffering. As an aside, imperialism is generally better than anarchy. Ask Libyans and Somalians how anarchy is working out for them.